Understanding OSFI's Proposed Changes to Mortgage Lending Rules

Have you heard about the buzz surrounding the new proposed rules by OSFI (Office of The Superintendent of Financial Institutions)? If not, let me break it down for you.

On March 22, 2024, it was confirmed that in the first quarter of 2025, OSFI will implement new criteria for banks regarding their Loan-to-Income (LTI) percentage. Currently set at 7.5% for the five major banks, this percentage represents the total amount of loans a bank issues annually relative to its portfolio. In simpler terms, for every dollar of annual income, the bank is comfortable lending out $7.5. Let's illustrate this with examples:

• Client A has a household income of $200,000. So, 200,000 x 7.5 = $1,500,000. With a $1.5M loan, buying a nice home is within reach.

• Client B has a household income of $65,000. Thus, 65,000 x 7.5 = $487,500. This amount could buy a decent starter condo or home, depending on the city.

However, the new rules proposed by OSFI are set to cap this LTI percentage at 4.5%, a significant decrease from the current rate. Moreover, this rule will specifically apply to uninsured loans, primarily affecting properties valued over $1 million. Let's revisit the examples:

• Client A's loan capacity now reduces to $900,000 (200,000 x 4.5), which might mean considering a smaller property.

• Client B's loan potential decreases to $292,500 (65,000 x 4.5), limiting options even further.

But why is OSFI making these changes? Essentially, they aim to prevent banks from accumulating too many high-risk loans, especially in anticipation of a potential increase in real estate prices when interest rates decrease. By implementing stricter criteria, OSFI hopes to mitigate the risk of defaults, which could significantly impact banks' financial stability.

Financial experts suggest that while these changes may not directly affect individual borrowers, they could impact the overall banking system. As long as banks can maintain a balanced portfolio, the system should remain stable.

However, the repercussions could be significant for both buyers and sellers. With smaller buyer pools, purchasing power diminishes, potentially affecting property prices. Sellers may find their pool of prospective buyers shrinking, potentially impacting their property's market value.

Analyzing data from the Toronto Regional Real Estate Board (TRREB) from 2023, which saw a 13% decline in sales compared to the previous year, we can see that the majority of sales fall within the $1M-$1.5M range for detached homes and $500k-$1M for condos. These segments will be significantly affected by the new rules.

73.8% of sales transactions in the TRREB board last year were in detached homes and condo apt resales, so let’s work with that.

As we can see from the graphs below, the vast majority of sales were between $1M-$1.5M for detached homes and $500k-$1M for condos, with 12,441 and 15,968 units sold, respectively. 

 Here's where it gets interesting: Remember when I mentioned that the 4.5% portfolio cap only applies to uninsured loans? Everyone in the above-a-million-dollar bracket will feel the impact, whereas condo owners can breathe a little easier—unless they're looking to sell their condo to buy a larger property. In that case, they might find themselves unable to afford the upgrade due to stricter lending rules the banks must follow. As for those with detached homes, it's safe to assume that their buyer pool, which typically multiplies by 3-5 available buyers for every home sold, just decreased by 25-30%.

In conclusion, while the exact impact remains uncertain, it's essential for both buyers and sellers to consider these proposed changes carefully. Whether to sell now or wait could make a substantial difference in property value and market demand.

If you are interested in understanding how these changes could affect your property's value or your next move in the market, feel free to reach out anytime.

So, there I was, standing outside my daughter's school, waiting to scoop her up from the daily grind of education, and what were the other parents yakking about? Real estate, of course! Because in Toronto, you can't escape those hot property chats even if you tried. As a real estate agent in the midst of all this madness, I thought, why not channel this river of chatter into a blog post?

I've been around the block (pun intended) when it comes to market corrections. This one is winning the endurance race, but like all the others, it shall pass. Inflation will eventually kiss the Bank of Canada's 2% target, and interest rates will crawl back under 3%. I mean, I personally think 4% is a sweet spot for various reasons. It's like the chill pill for the market, helping to ease the price frenzy, bidding wars, and basically acting as the market's therapist. But we'll dive into that in another post.

But back to my chit-chat session – my buddy and I were discussing the business's ups and downs, particularly the downs, because life's not all sunshine and rainbows, right? And I'm not one for sugar-coating things. I mean, I'm as straightforward as your GPS navigation, especially when clients are diving into the deep end of real estate. This year, thanks to our buddy COVID-19, it's been a rollercoaster. Roughly 45% of Torontonians can't afford the current property prices, and those who can typically have the financial backup of dual incomes or, better yet, had the foresight to buy before the 2015 property price rollercoaster. This city condos are selling for almost as much as unicorn tears, going for a whopping $1,200 per square foot! And don't even get me started on pre-construction prices; they're basically selling dreams at this point. You know, the kind of dreams that cost a fortune. And freehold houses? Well, they come with a hefty price tag ranging from a mere $1 million to a jaw-dropping $2 million and above, and that's just for houses that need a bit of TLC. Renovations can kick off at $300 per square foot, and there's no telling how high they can soar. Plus, contractors, with their uncanny knack for uncovering "unexpected issues," make sure you're aware of those extra zeros on your bill.

Now, let's swing the spotlight back to the main stage – the market. So, my friend was curious about how I'm handling clients who are basically waiting for pigs to fly. They want the market to hit rock bottom, interest rates to drop into the basement, and for all the stars to align before they make a move. But let's rewind for a sec, shall we? Remember those days when interest rates were at a measly 1%, inflation was taking a nap at 1.5%, and sellers were the kings and queens of bidding wars, pushing prices $200,000 to $500,000 above asking? Those weren't walk-in-the park days either. Property values were skyrocketing at 20-30% a year, and if your property sat on the market for more than 3-4 days, it was basically the wallflower at the market's hottest dance.

Now, he popped the question – “What are the hurdles you’re facing with these hesitant clients?”

 To put it bluntly, no matter how I craft the argument, many can't see through the thick fog of uncertainty to the promising rainbow on the other side. So, I figured, why not let my fingers do the talking and make a blog post and give you the nitty-gritty from a real estate warrior battling it out in the trenches every day, rain or shine.

Here's some data, because there’s no point in rambling on if I don’t have the numbers to show you, fresh off the press as of October 17, 2023. Current interest rates from the big banks are dancing around 6.34% for a 5-year fixed rate, and some are going even higher, to the heavens of 7.5-8%. Banks are also offering a 3-year fixed rate. For argument's sake, let's roll with the big boys, and assume a 3-year fixed rate of 6.34% from TD. Buckle up, 'cause here comes an amortization table for a typical 3-year journey with both principal and interest.

Now, let's break it down with some cold, hard numbers for a condo you're eyeing, with a 20% down payment. Drumroll, please...

(this example is for a 2 bed 2 bath condo in the Park Lawn area in Mimico that is around 850sqft.  Average resales price is used)

-               Condo price: $813,073 (because in Toronto, this gets you a view of Lake Ontario, right?)

-               Down payment: $162,614 (this is 20%)

That's a grand total of $118,968 in interest payments over 3 years, in case you're keeping score.

(This table is served with a 6.34% interest rate, amortized over 25 years, and a 20% down payment.)

Now, here's where it gets juicy. A 3-year fixed mortgage lets you renegotiate with your lender when the term ends. So, here's the twist – will interest rates still be lurking in the skies when your 3-year term ends? Probably not. Economists, the fortune tellers of finance, predict that by the end of 2025, interest rates will likely be back down to 2.5%, if not in the area of. So, you gotta ask yourself – what's the numbers if you wait and ride the interest rate wave to pay less in interest? Let's check out the remix of our table with those sweet 2.5% rates:

(Same Price, down payment, mortgage term, just different interest rate)

(Same Price, down payment, mortgage term, just different interest rate)

That's a snazzy $46,440 in interest payments over the 3-year joyride – that's a significant difference!

But there's a little hiccup we didn't invite to the party. While you're sipping your tea, waiting for interest rates to chill, the purchase price of $813,073 may have joined the circus – it's become quite the acrobat and it’s probably safe to assume that the price has now increased by at least 50-100k.  I’ve seen it too many times.

Here's a metaphor I've been tossing around in markets like these, and trust me, it's as accurate as an arrow: Picture yourself in a boat, floating down a river teeming with piranhas. You reach into a bucket and toss some fish chum into the water. Now, can you see it? The water boils with hungry piranhas, feasting on the buffet you just offered.

Now, let's replace that river with Toronto's real estate market, those piranhas are buyers, and the fish chum are the sellers. I bet you're starting to see where I'm going with this.

But here's the golden nugget you need to engrave in your brain: 

**TIMING THE MARKET DOESN'T WORK.** 

Seriously, it's like trying to predict which way a cat's going to dart when you're trying to put it in a bath. You might get lucky, but most of the time, you're just setting yourself up for a good ol' struggle.

And here's another twist – even if you somehow manage to time the market right, and you spot a property that's your dream come true, sellers will still have the upper hand because, well, market conditions! Bidding wars, my friend, will make a grand comeback, and they won't just knock on your door – they'll burst in like a house party on New Year's Eve.

Here's a brain teaser for you – when interest rates do that graceful decline and start going down, what do you think will happen to property values? I'll save you the suspense; they're like helium balloons at a birthday party – they go up. By how much? No one has the crystal ball for that.

Let's say, just for sh*ts and giggles, you stumble upon this condo. It's a 2-bed, 2-bath, 850 sq f unit with a view that'll make you say, "Goodbye, reality!" Rates just dropped from 6.34% to 5.75%, and everyone's thinking about buying again. The condo seller, being no fool, lists it for $799,000 with an offer date set for seven days later, 'cause that's just how we roll in Toronto. There are showings galore, and on offer day, your bid is one of three musketeers.

In this high-stakes poker game, for every offer on the table, expect an additional 15-25k per offer to be tossed into the pot. Let's do some math, shall we? (Assuming the condo is still worth $813,073)

- Listing price: $799,000 (or what I like to call “Advertised Sales Price”)

- Three offers, so you gotta throw in an extra cash to snag the prize. - You offer: $865,000, and you win!

Hurray! You just bagged the condo for $865,000. Here's the thrilling amortization table:

(the numbers change because we are assuming 20% down and the price has increased by 51k)

That's a total interest payment of $114,663. That’s definitely better than $118,968 when interest was higher but not by that much. But wait….You just spent $51,927 more on the condo, and your grand total expenditure on interest and the purchase is $166,590. That's $47,622 more than if you had ignored the sirens of "interest rates and timing the market."

Remember, this short-term pinch you might feel isn't a loss; in fact, it's savings in disguise. This example is as clear as a freshly wiped windshield after a car wash. The data isn’t secret, it’s in public records. As your trusty real estate guide, my mission is to hand you the keys to informed decisions, rather than leading you down the garden path for a paycheck. I get it; the real estate industry sometimes gets a bad rap because of agents doing the ol' smoke-and-mirrors dance. But let me tell you, the facts are as black and white as a penguin convention. You have the info, and it's your call how you use it.

As of now, the resale market is doing a happy dance for buyers. Sellers are less mighty, and competition has slinked into the shadows. Buyers are swooping in, snapping up deals without breaking a sweat – it's like a leisurely stroll through your favourite store when a sale is going on.

If you'd like to play around with the purchase calculated I use the link is here

If you've got questions or need help finding that unicorn of a property or a sweet mortgage deal, don't worry; I've got a Rolodex of reliable pros in my back pocket. I'm here to offer you honest-to-goodness, ethical guidance.  You can call or email me anytime at 647-801-2233 or [email protected]

So, happy hunting, my fellow property explorers!

Cooking With Harper 

Episode 1

**Harper's Culinary Journey: Daddy's Breaded Chicken**

Episode One: A Delicious Beginning

Harper (my daughter) and I embarked on a culinary adventure and our first stop? None other than her favorite dish—my signature breaded chicken. Now, let me share a little secret: I've never really followed a recipe for this. Why? Well, it's a legacy that harks back to my summers in Italy. Picture me at 13 or 14 (I’ve even given you something to giggle at), visiting my father's side of the family every couple of years. Those summers were a whirlwind of flavors and traditions, and it was there that I learned this cherished recipe from my Nonna.

(A yearbook photo of me when I first went  👉🏻

to the National Ballet School in '92

31 years ago 😳)

I can still vividly recall an afternoon that etched this dish into my memory. We gathered around the dining room table, and my Nonna was cooking up some lunch in the kitchen—breaded chicken sizzling away. Moments later, she emerged with a plate loaded with eight pieces of golden-brown chicken perfection. As we savored our meal, laughter, a cucumber salad, wine, and freshly baked bread formed the backdrop.

At that moment, I was the ravenous growing teenager (you know the type) who couldn't get enough. I tackled my portion of chicken like a machine, leaving a trail of amazement in my wake. With every bite, my family watched in awe, astounded by my insatiable appetite. Little did they know, that feast would mark the beginning of my culinary journey.

The next serving of that delectable meal brought a valuable lesson from Nonna herself. She guided me into her kitchen—declaring, "If you can make this, you can make anything. Cooking is simple... just make sure to have fresh ingredients, lots of love, and empty stomachs."

Since then, I've been dishing out my beloved breaded chicken for Harper, hoping that one day her own culinary curiosity would begin to spark. And it finally happened! As her fascination with food bloomed, we seized the opportunity to embark on this culinary adventure together. There's something magical about crafting a meal with your own hands—something that makes every bite all the more satisfying.

And now, my dear readers, I present to you the culmination of our efforts—an invitation to join us in recreating this timeless recipe. But before you dive in, let me set the stage with the ingredients you'll need:

- 2 Chicken Breasts (always opt for the freshest)

- 2 Eggs (feel free to add a third if they're not jumbo-sized)

- ½ Cup of All-Purpose Flour

- 1 Cup of Bread Crumbs (I’ve never used Panko for this recipe, but go for it if you want)

- 1 Cup of Grated Parmesan (a true flavor champion)

- 1 Teaspoon of Salt

- 1 Teaspoon of Pepper

- 1 Tablespoon of Dried Oregano

- 1 Tablespoon of Dried Basil

- ⅓ Cup of Extra Virgin Olive Oil

We've documented our culinary journey in a video that captures the essence of this silly experience. Join Harper and me in the kitchen as we slice, dice, and create delicious food together. You'll witness firsthand the joy of cooking as a family, the laughter that accompanies every step, and the sheer delight of savoring the fruits of our labor.

Are you ready to embark on this culinary adventure with us? Don't miss out on the fun—we invite you to watch the video we've created, a window into the world of our breaded chicken masterpiece. Get ready to be inspired (maybe), entertained (definitely), and maybe even a little hungry (hopefully).

Simply click the link below and join us in our kitchen escapade:

[Watch the Video Here]

We can't wait to share this journey with you, and we hope it brings a smile to your face as much as it did to ours. Until next time, bon appétit! 🍗👨‍🍳

In Toronto’s real estate market the words ‘bidding war’ have become all too familiar. We have moved past the idea that they will go away and now I am asked, “how can we win this bidding war?”

I’ve pulled together some tips I use with my buyers to close a sale and a few tricks that I’ve learned over the years that have won over my sellers. Make sure you are following me on Instagram or Facebook so that we can chat more about this as the spring market gets into full swing.

Win a Bidding War: A Realtor With Relationships

Working with a realtor who has relationships with other realtors in the area is a huge benefit. In a scenario where there are a dozen offers, the selling agent must present them all to their clients. The homeowners will often ask their agent for advice and if your realtor has had a conversation about your air-tight and trustworthy offer, it could be a matter of your offer coming out on top. Be the offer that isn’t going to go south. If your realtor has a prior relationship with and built up trust with the selling agent, everyone involved wins!

Win a Bidding War: Bring a Cheque

On offer night, bring a deposit cheque with you. Yes, it costs money to have the bank print a cheque. Think of it as an investment in winning the home of your dreams. I have been in situations when my client’s offer is in the seller’s top three, and my ability to tell the selling agent that I can drop off a cheque within the hour won them the home. If you don’t have a cheque, which is a sign to the seller that you are serious, the deal could fall apart.

Win a Bidding War: Write a Letter or Make a Short Video

What’s your story? Why do you want this house? How will it change your and your family’s life? Write a letter or make a short video (I’m not talking about a production company-style video here, just simply record yourself on your phone) and tell the sellers what you love about the home and how it could change your life. Pull on the heart strings, make the most memorable offer in the bidding war and set yourself apart from the others. It works!

Win a Bidding War: Fight for What You Want

Don’t be afraid to get your elbows out and push to the front of the line – figuratively, not literally. We aren’t going to actually fight, but we can be competitive. If you find a home that you really want, reach for it. Get ready to battle with others who also want it. This means be realistic about how much you can afford, be prepared to go in without conditions (more on that next) and get ready for a little back-and-forth when your first offer is signed back. Ask yourself: how badly do you want this home?

Win a Bidding War: Get Comfortable With No Conditions

This one may seem risky, but there are ways to get comfortable with putting together an offer without conditions. Be honest with your realtor and tell them what scares you. Is it the state of the home? In most cases in Toronto, the seller will have a home inspection done and share the report. If timing permits, your realtor can have another one done for about $500, and with that investment in your peace of mind, you could be more comfortable (or not) making an offer without that condition. If you know the home inside and out, and you feel confident, you are in a good position to put in a strong offer and win.

Win a Bidding War: Figure Out Your Finances

Another condition you need to be comfortable waiving is financing. Figure out your finances before putting in an offer. Talk to a professional broker and get pre-approved for a mortgage. Get everything in writing. Knowing how high you can go will give you leverage when you’re in a bidding war and offers are being signed back. Be strategic and be bold within your means.

Win a Bidding War: Get to Know the Neighbourhood

When you engage a realtor who knows the neighbourhood, you’re already ahead of the game. Compare what the selling price is to others homes on the street and nearby. Your realtor should have information about recent selling prices – and how many offers came in for the property. All of this information will help when you sit down to write an offer and if you strike it just right – don’t low ball and don’t overbid – you could be a winner!

So, think you can win? Have any more strategies to win a bidding war? Send me a note.

If you’re wondering about the best time to buy, I wrote a recent blog post about Buyer’s and Seller’s Markets, check it out here.

If you’re interested in learning more about me, how I treat my clients differently than most, and how I can help you in your home buying journey, check out my introductory blog post here.

I’m always up for a virtual coffee chat! Call me anytime at 647-801-2233 or send me an email here and let’s connect soon!

There’s something about spring that makes you want to throw open all your windows, give the house a good cleaning and toss out the clutter that’s been making you crazy all winter. Am I right?

When it comes to selling your home, the same motivation applies.

To start, homeowners need to be open to new ideas (and help from your trusted realtor!), get ready to do a deep clean and a serious de-clutter. There are some definite Do’s and Don’ts when it comes to getting your home ready to sell, so I’ve compiled them here for you.
Remember: if you or someone you know is thinking of selling, send me a quick email or give me a call! Feel free to forward this blog post to them as well. The earlier we can make a plan together, the better!

Getting Ready to Sell: Do’s

1. DO make a list of big jobs that need to be done around the house.

One question I always ask my clients when they are thinking of selling their home is: are you willing to invest money in your house to sell for a higher price? If the answer is yes, we need to make a list of the big jobs that need to be done around the house. I also advise to anticipate that some (or all) of the jobs could take 3-6 months to complete.

What do I mean by “big jobs?” Big jobs are things like installing a new roof, a new furnace, selecting and installing new flooring and replacing windows. These will pay dividends when you sell the home, and you just need to consider if you are going to invest time and money to have them done.

2. DO de-clutter, paint and tackle small improvements

I’m often asked by clients if they should renovate before selling their home. Should they fix up the bathrooms, or the kitchen, to appeal to more buyers?

It’s a great question. I usually say no. If you're going to spend that much money on a renovation, wouldn’t you like to enjoy it also? Another thought is, if you spend 15k for a bathroom reno or 60k on a kitchen reno, more often than not, these expenses won’t reflect on the selling price.

Small renovations will not reap the benefits when it comes time to sell. Extensive ones, yes! However, improving areas of the home with new paint, updated light fixtures and a general de-cluttering will help the house show better and will freshen it up perfectly. It also allows the new owners to envision themselves living there, and they can make changes or renovate to their tastes after purchasing the property.

3. DO work with a realtor with a game plan

I recently worked with a client who was getting ready to sell a home they had lived in for a decade.

The de-cluttering, packing and storage of items became very overwhelming and I could see it. I suggested they let me take over, knowing that isn’t easy for a lot of people!

I came to them with a plan of how to tackle the job. I had a team to help pack up each room with labelled boxes, we used their garage to store some items and I helped them hire a painting crew to get the house a fresh coat in no time. In the end, it relieved their stress and we listed their home with a successful outcome.

I always say, work with someone who won’t push you into making bad decisions, but will help you make good ones. When you’re getting ready to sell, work with a realtor who can show you what they do to prepare a home for sale and the team they can bring to get it done in a timely manner.

Getting Ready to Sell: Don'ts

1. DON’T miss the best times to sell

The best times to sell are in the spring and fall markets. Those months are generally March to June and September to early November. If you are interested in selling your home and you want to invest in doing some big jobs, such as replacing the roof, HVAC system, flooring or windows, to increase the value of your home, plan for 3-6 months to get them done. If you need to clean, de-clutter and paint, plan for up to a month to get this done and get your home on the market.

2. DON’T think you need to do it all on your own

Getting your home ready to sell is not something you have to do all by yourself. If you work with an experienced realtor, that person should be able to tell you what they do to help you sell and who they can bring in to help you sell.

Your realtor should have connections to contractors, tradespeople and service providers. From big jobs like replacing HVAC to painters and packers, you can ask for help assembling a team so that the stress of preparing your home to sell is not overwhelming.

3. DON’T forget to tell everyone you know

Tell everyone you know when you are preparing to sell your house. That way, when your home goes up on the market, word has already spread.

You never know, you could have someone in your social network, who is interested or who knows someone who would be interested in your home. Word of mouth is still the most powerful tool we can use in selling real estate.

Wondering about the best time to buy and sell your home? I wrote a recent blog post about Buyer’s and Seller’s Markets, check it out here. 

If you’re interested in learning more about me, how I treat my clients differently than most, and how I can help you in your home buying journey, check out my introductory blog post here.

I’m always up for a virtual coffee chat! Call me anytime at 647-801-2233 or send me an email here and let’s connect soon!